The last 10 years have been a wild ride for Catapult International Group (ASX: CAT) shares, as a business and for its investors. When I initially covered Catapult shares, I shared the following historical chart to show why this company deserved a place on your watchlist.
If I were to extend that chart to today, five key developments stand out. All of them are positive. These developments either highlight the company’s improving performance or the growing investor attention it’s receiving, leading to the strong Catapult share price momentum we’re seeing now.
I’m setting this context because it has taken a long time for Catapult to rebuild investor confidence. Catapult CEO Will Lopes deserves much of the credit. The last time the company enjoyed this level of investor support was back in 2017; and the decline that followed was largely due to its pivot toward the consumer market (as evident in the first chart).
Now is a crucial time for Catapult’s leadership to stick to the course and continue executing as they have over the last four years, without deviation.
When I wrote my last article, I highlighted four reasons behind Catapult’s rising valuation:
- Strategy Execution
- Index Inclusion
- Positive Free Cash Flow
- Operating Leverage
All four reasons remain valid after the FY25 results, which explains why the Catapult share price has gone from around $4.30 to $5.30 (at the time of writing). That’s an increase of about $270 million in market cap. Let’s dig into the results to assess whether this increase is justified — or just hype.
Catapult’s FY2025 Revenue Growth
The chart below shows Catapult’s revenue growth by half year, over more than 6 years. There’s no significant lift from H1 FY 2025 revenue compared to H2 FY 2025, but that’s consistent with previous years and nothing to be concerned about, in my view.
Revenue for FY25 came in at US$116.5 million, compared to US$100 million in FY24, which is a 16.5% YoY increase on a reported basis. On a constant currency basis, growth comes in at 19% YoY.
Catapult’s revenue is driven by two key components that are fundamental to most SaaS businesses:
- Number of Customers – in Catapult’s case, that means the number of professional teams.
- Currently, Catapult serves 3,602 pro teams.
- Currently, Catapult serves 3,602 pro teams.
- ARPU (Average Revenue Per User) – or in Catapult’s terms, the Average Annualized Contract Value (ACV) per pro team.
- That figure now sits at US$26.8K per team.
However, only 741 of those 3,602 teams (20.5%) are using more than one Catapult product currently.
According to the company, there are roughly 20,000 pro teams globally. That puts Catapult’s current market share at around 18%. So, not only is there ample headroom to grow the customer base, but even within its existing customer base, ~80% are still using just one product.
Catapult therefore has two strong levers to pull for future revenue growth:
- Signing up new teams
- Expanding existing relationships through cross-sell and upsell opportunities.
Annualized Contract Value (ACV) grew 18% YoY (constant currency). While I don’t put a lot of emphasis on ACV, it remains a useful leading indicator of upcoming revenue. The net ACV addition this half was relatively low ( as can be seen from the graph below). It may be due to timing, given the strong H1. It’s something I’ll be watching closely, as it could hint at slowing growth.
Segment revenue contribution has been following the same pattern as per last few years so nothing of a concern..
However, one thing stood out: management changed their segment reporting format this year. Normally, they disclose EBITDA by segment, but this time, they didn’t. I’m not suggesting anything sinister, but there must be a reason, and personally, I don’t like when reporting structures change without explanation.
Catapult’s EBITDA and EBIT
While Catapult has not yet achieved profitability, the FY25 results indicate progress toward this goal. The company generated positive earnings before interest, tax, depreciation and amortisation (EBITDA), but its earnings before interest and tax (EBIT) is still negative, albeit improving.
Catapult’s Free Cash Flow
The chart below shows the free cash flow (I have calculated free cashflow as Net increase/decrease in cash and adjust for loan drawdown/repayment and cash received for share issues, but I haven’t factored in the impact of Employee share-based payment expense for this graph). According to my calculation free cash flow comes at around US$ 6.9m for FY25
Catapult’s Operating Leverage
When I wrote article discussing FY24 results, I noted that the long-term profit margin target is 30% and that the incremental improvement in the net loss implied operating leverage was working.
In the last 12 months, Catapult increased its revenue by US$16.5m, and out of that US$16.5m, US$10.8m fell to its bottom line. This is very important because it supports the contention the company is becoming more profitable (or at least less loss-making) as it scales.
Catapult Shares Valuation
At the time of writing, Catapult’s share price is around A$5.30, giving it a market capitalisation of approximately A$1.435 billion.
For FY25, by my calculations, the company generated about US$6.9 million in free cash flow, or roughly A$10.7 million.
That means if you owned the whole business for A$1.435 billion, you’d be getting a free cash flow yield of just 0.74%.
So yes, Catapult is currently on a free cash flow yield of 0.74%, which is very low, but as I’ve mentioned in previous articles, valuation really comes down to the growth investors expect in the future.
The CEO has suggested that their long-term goal of reaching a 30% profit margin could be achieved once revenue hits US$200 million, potentially in the medium term.
In one interview, he also suggested that ARPU that currently sits around US$ 27K has potential to go as high as US$ 150K. If I plug those figures into my calculations, the free cash flow yield in the not-too-distant future looks a lot more attractive than it does today.
There’s always execution risk, but CEO Will Lopes has built credibility by consistently delivering on what he says, so I’m still comfortable holding it.
That said, if I didn’t already own it, I probably wouldn’t be buying at this price. But given my long-term approach as an investor, I have no current intention to sell any shares (though, of course, changing circumstances could change my view in the future).
Disclosure: The author of this article owns shares in CAT. The editor Claude Walker does not own shares in CAT. Neither will trade CAT shares for at least 2 days following the publication of this article. This article is not intended to form the basis of an investment decision and is not a recommendation. Any statements that are advice under the law are general advice only. The author has not considered your investment objectives or personal situation. Any advice is authorised by Claude Walker (AR 1297632), Authorised Representative of Ethical Investment Advisers Pty Ltd (ABN 26108175819) (AFSL 276544).
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